All the pieces are in place for a major uptrend in gold

All the pieces are in place for a major uptrend in gold to begin right away, and it appears to be starting as this is being prepared. The Commercials have cleared out virtually all of their short positions, for a massive profit of course, meaning that the slate is wiped clean for the game to start over anew. Public opinion and sentiment towards gold remains rotten, which is exactly what you expect to see at a major low, with the investing public at large, having been duly “educated” by the mainstream media, harboring a negative attitude to gold and if anything inclined to short it. Lastly, seasonal factors couldn’t be better – August and September are traditionally the best months of the year for gold.

On its 1-year chart we can see that gold had already broken out of its steep downtrend in mid-July, since which time it has been held in check by its falling 50-day moving average, which is now starting to flatten out, so that a bull Flag appears to have formed as the price retreated back along the top of the trendline that it had earlier broken above.

This Flag implies another upleg, which appears to have started this morning, and this uptrend could really gain traction soon if the price breaks above the nearby resistance shown, given the huge speculative short positions that have built up and the consequent potential for massive short covering. The gap between the 50 and 200-day moving averages provides a measure of how oversold gold is. Of course, breaking above the strong resistance at the earlier major support in the $1550 area that failed back in the Spring will be a tough nut to crack, but we will have to see how gold shapes up approaching it, in order to assess the chances of an early breakout above this key level. Read more >>

Gold Shorts Cover At Fastest Pace In 13 Years

Gold shorts covered an enormous 23,518 futures contracts last week - the equivalent of 2,351,800 ounces of gold. With JPMorgan appearing to be calling everyone (here and here) to get their hands on gold to deliver, it seems our concerns over a short-squeeze are starting to solidify.

The last time shorts collapsed at this fast a rate was in the 1999/2000 period which saw a considerable 33% squeeze ramp in gold prices over the space of 3 weeks in the fall of 1999. Notably, the gold short position still remains huge compared to historical values - having fallen back only to the previous all-time record high levels (i.e. plenty of room for moar squeeze). In addition to this surge in covering, Gold ETFs saw their first inflows in 2 months. Read more >>

Peter Schiff on Gold and Silver: Load the Boat and Back Up the Truck

Greg Hunter’s USAWatchdog.com
For anyone who sold physical gold in the current precious metal downturn, money manager Peter Schiff says, “There’s going to be a big problem because the gold they sold on the way down isn’t going to be available on the way back up because the people who own it aren’t going to sell it at any price.

This is the time to load the boat, to back up the truck.”  Schiff is a longtime advocate of precious metals and has taken much criticism in this downturn.  Schiff answers his critics by saying, “The people who are always making fun of me every time there is a pullback are the ones that never bought gold in the first place.

Even though it’s pulled back, it’s still a lot higher than it was when they first started laughing at me for buying gold.”  Talk of a new Fed Chairman to replace Mr. Bernanke will only be bullish for the gold price.

Schiff predicts, “If it’s solely based on which Fed Chairman is the most bullish for gold and silver, I would say that would be Janet Yellen.  No matter who’s put in at the Fed, they are going to keep printing because that’s all they can do.”  Schiff warns, “They’re going to keep printing until we have a currency crisis . . . and that is the most bullish environment for gold. Read more >>

Gold Smuggling Soars In India

India, the world's largest gold consumer, meets almost all of its demand via imports, and purchases from abroad require buyers to sell the rupee to raise greenbacks. Government efforts to curb imports is meant to limit that downward pressure on the currency but has instead driven a surge in illegal imports (smuggling) of the precious metal.

The rupee has fallen more than 10% in the past couple of months and the country has sharply increased the import tax on gold to 8% (from 1% in Dec 2011) and last month India's central bank banned the use of credit to procure gold (requiring dealers to pay in advance for imports). As the WSJ reports, the measures are having an effect. Gold imports declined 11% to 859.7 tons in 2012 from 969 tons in 2011 and the total for June fell about 80% to 30 tons from 162 tons. Read more >>

Gold Surges To Its Best Day In 13 Months

With gold now up an impressive 13.1% from its post-Bernanke lows 3 weeks ago (notably more than the +8.8% in US equities), it appears the physical demand is quietly catching up to the paper supply. As we noted here, shorts covered around 11% of their positions in the last week and we suspect today's surge is yet more covering as the massively over-crowded paper-short gold position starts to unwind.

Of course, this surge is disappointing to many (including China we suspect) as the 'transitory' end of the price beatdown means we can buy less physical (and take immediate possession) now than at the June lows of $1180. With gold testing its 50DMA for the first time since February, we suspect the momo crowd will be quick to jump ship should we push on through. Read more >>

Gold’s undervaluation is extreme

The price of gold fell last week to the $1,200 level. The lemming sentiment in capital markets is uniformly bearish, yet every price-drop brings forth hungry buyers for physical gold from all over the world. Even hard-bitten gold bugs in the West are shaken and frightened to call a bottom, yet it is these conditions that accompany a selling climax. This article concludes there is a high possibility that gold will go sharply higher from here.

There are three loose ends to consider: valuation, economic and market fundamentals.

VALUATION

So far as I am aware nearly everyone is overlooking the obvious. You cannot consider the value of gold without taking account of the changes in the quantities of the currency and the above-ground stock of gold over time. The chart above shows the adjusted US dollar price of gold rebased to 100 in January 2005 when the gold price was $422. In 2005 dollars, using True Money Supply plus excess reserves as the currency adjustment, gold has risen only 13.9% to an equivalent price of $481.

TMS, or Austrian Money Supply, represents cash, checking accounts and savings deposits that can be redeemed for gold under a full convertibility regime. Excess reserves represent the funds deposited by banks at the Fed, which similarly can be redeemed for gold. The sum of TMS and excess reserves are therefore the comparable currency measure. Read more >>

Redemptions In The GLD Are Bullish For Gold

Recent outflows from physical gold exchange traded products (we use the SPDR Gold Shares, GLD) have been interpreted by the financial press as a sign of weakness in the demand for gold as an investment vehicle.

However, a closer look at the evidence suggests otherwise: the largest outflows in the history of the GLD (see Figure 1) started well before the large drop in the price of gold we observed on April 15th, 2013 (-9%, which represents a 1 in 11 years event). In fact, the net redemption of shares of GLD started as early as the second week of January 2013 (on a 3-month cumulative rolling basis). In this note, we will explore the theory that it was the shortage of physical gold and the ensuing arbitrage opportunity that drove market participants to redeem shares of GLD.

So why are the bullion banks that act as Authorized Participants for GLD, a group that includes JP Morgan and HSBC and others (who by-the-way were mostly bearish on gold leading to the April Crash), redeeming so many shares of GLD? Read more >>

Silver Gets Slammed

The metal fell victim to heavy selling on Monday, dragging gold down with it, on U.S. dollar strength and as investors turned more cautious on precious metals as an alternate investment, said experts.

"We feel silver weakness has been a liquidation trade as investors grow increasingly wary of precious metals and traders are forced to close positions to meet margin calls elsewhere," said Stan Shamu, strategist at trading firm IG Markets.

Silver slumped over 4 percent on Monday to $21.30 an ounce, leading gold down lower by 1 percent to $1,344 an ounce. At one point silver hit a low of $20.30, down 8.8 percent from the start of trade on Monday.

Shamu is not ruling out further downside for the precious metal, noting that he sees support at $20, a key psychological barrier for investors.

Warren Gilman, chairman & CEO of investment firm CEF Holdings, agrees that silver could face further downside pressure, even below $20.

"When we have short-term volatile trends, silver acts like gold, only it's more volatile, so it's not a surprise to see it come off," he said.

According to a Citi report, if silver makes a rebound back towards the $27-28 level it will present renewed selling opportunities. Read more >>

Gold slide flashes warning signs for global economy

Gold Feet (Photo credit: @Doug88888)

The plunge in the gold price in the past week may have raised a big red flag over the global economy.

Some top investors say the gold sell-off, and the broader declines in oil and metals prices, reflect the failure of the Federal Reserve and other central banks to create robust demand even as they inject massive amounts of money into the world financial system.

The slide, which took gold to its biggest one-day loss ever in dollar terms on Monday, unnerved investors who saw billions of dollars in gains wiped out in a few days, and it may portend declines in other asset prices ahead. That may have begun this week with several days of big stock price drops.

Some see the move in gold as a possible flashpoint for a broader economic and markets shock comparable to the collapse of hedge fund Long-Term Capital Management in 1998 and even the financial crisis a decade later. Both events were preceded by sharp drops in gold.

The gold and commodities weakness is "signaling concerns about global growth," said Mohamed El-Erian, the co-chief investment officer of PIMCO, which oversees $2 trillion in assets. "Commodities have been sending the signal on growth for a while, and now even louder." Read more >>

Arizona Becomes Second State to Approve Gold and Silver as Legal Tender

Last Monday Arizona lawmakers passed a bill that makes precious metals legal tender. Arizona is the second state after Utah to allow gold coins created by the Fed and private mints to be used as currency. More than a dozen states have legislature underway to pass similar measures.

The bill comes hot off the heels of one of the largest drops in the price of gold. The metal fell 9% yesterday -- its biggest one-day drop in 30 years. Gold’s volatility may make it hard to go to a grocery store and pay for milk and eggs with bullion coins.
Related: Gold Tumbles Again: Is the Era of Gold Over?

“Yeah, I know gold is down right now,” Arizona State Senator Chester Crandell and sponsor of Senate bill 1439, tells The Daily Ticker. “People are still buying gold and using it as a commodity and I think they want to use it as actual legal tender instead of the dollar."
Senator Crandell says that the differences between gold as a commodity and gold as legal tender are pronounced. Read more >>

Germans hoarding mountains of gold

Germans are gathering vast quantities of gold - a study showed that the average German owns close to €6,000 worth of the shiny metal.

Even though Europe's largest economy has weathered the world economic crisis relatively well, Germans have still been extra jittery about their savings, a study by the Steinbeis Research Center for Financial Services in Berlin revealed.

Around 32 percent of the gold owned in Germany in the form of bars and coins was accumulated since the financial and economic crises began, the study concluded.

Commissioned by precious metal trading group Heraeus, the study also found that people with surplus cash are becoming gold-greedier. The number of Germans with a net monthly income over €4,000 who say they intend to invest in gold has doubled in the current year.

On average, every German owns around 117 grammes of gold, comprising 55 grammes of jewellery and 62 grammes of bars and coins, the study, which surveyed 2,000 people, found. Taken together with gold securities, the average German owns some €5,750 of gold. Read more >>

CME Declares Force Majeure at Manhattan Gold Depository

CME Group Inc. (CME) on Monday said that Manfra, Tordella and Brookes Inc., one of the exchange's gold depositories, will not be able to delivery metal as the lower Manhattan company deals with "operational limitations" almost a month after the arrival of Hurricane Sandy.

MTB, one of five depositories licensed to deliver gold against CME's benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex.

In a notice to customers on Monday, CME declared force majeure, a contract clause that frees parties from liability due to an event outside of their control, for the facility.

CME said that individuals holding MTB warrants, or certificates for a specific lot of metal stored in the depository, may receive gold delivered from Brinks Co. (BCO) in New York. MTB is responsible for any additional costs incurred by customers receiving metal from Brinks, CME said. Read more >>

Jim Willie on Bank Runs, Bank Nationalizations, Bank Holiday's and Gold

Jim Willie, founder and editor of Goldenjackass.com, speaks about coming Bank Runs, Bank Nationalizations, Bank Holiday's and Gold.  (Part 1 and Part 2.)

Why Precious Metals Could Surge During A Deflationary Bank Run

The Future Tense
Things appear to be escalating in the Eurozone crisis, which has now turned into a full fledged bank crisis. While we have walked through the steps of the policy responses from political and monetary leaders numerous times, let's take a moment to walk through the process from the eyes of a citizen on the ground.

Imagine that you are an average citizen living in Greece. You have a family with two children and by now it is very likely that you have heard the news of a bank run. You are beginning to understand the ramifications of Greece moving back to the drachma currency after it leaves the Eurozone (an immediate and massive devaluation that would destroy 60-70% of your wealth).

Some Considerations on Precious Metals

http://readynutrition.com
If you want to expand your portfolio to include precious metals, here are some considerations: a single ounce of gold stores more value than silver. If you need portability for a large amount of wealth gold coins and bars will be your primary precious metals investment. Currently an ounce of gold is about $1550. With less than a pound of coins in your purse or backpack you can conveniently move $25,000 in value.
   
What gold offers in portability it lacks in divisibility. This is where silver comes in. You may not be able to move $25,000 of silver conveniently (weighing around 50 pounds!). But because of it’s lower value per ounce silver is an excellent mechanism of exchange for things like food, gas, clean water, or tools if the dollar hyper-inflates or crashes.

You can purchase silver in bars (100 oz, 10 oz) or coins (1 ounce, or U.S. government issued pre-1965 halves, quarters and dimes). With the smaller denomination coins like US quarters you will have portability for a small amount of cash (40 quarters is about $150 dollars worth) and you’ll have coinage that should allow you the ability to purchase just about any item someone is willing to sell.
   
Silver allows you to make modest, weekly investments of anywhere from $5 to $50 dollars and still build a store of wealth.
   
If you are investing a large sum of money into precious metals, gather details about the types of coins you are buying, especially if you’re buying gold. Acquire a coin caliper and/or testing kit to ensure you’re getting what is being advertised. More...

Utah to make gold legal currency

Image via WikipediaThe US state of Utah has passed a Bill that legalizes gold and silver for everyday financial transactions. Press TV talks with David Morgan, Silver Investor.com from Washington who was a party to the signing of this declaration to allow people to use gold and silver as transactional money for their everyday living expenses. He explains how this would be done. Following is an approximate transcript of the interview.

Press TV: There's a huge global insurrection against banker occupation and underneath that we see some interesting cross currents going on as well. You've just returned from the Utah monetary conference where you signed the Utah monetary declaration. How exciting - tell us all about it?

David Morgan: Utah is the first state in the union that has at law passed the fact that citizens can voluntarily transaction in the state in commerce. So in other words simply stated you can buy and sell with gold and silver as a transaction basis throughout the state.

Now, that is a little tough to do coin-wise so they've implemented a strategy that I think is very simple and one that we're familiar with - Put your gold and your silver with a depository; the bank gives you a credit on their balance sheet; they issue you with a debit card; and then you just use the debit card.

So to the merchants, Wal-Mart as an example, you simply swipe your debit card, the transaction goes down to the spot price that day whatever the spot price for gold or silver is and then at the end of the month they reconcile the account based on what you purchased during the month.

Once this is implemented I think it's going to catch on and then of course it sets a standard I think for other states to come along and do the same thing. There are 11 states that have proposed gold and silver in transactions, but Utah is the only one that has passed it in the law so far.

Press TV: If you have your account based in gold and silver and you're using it as your go-to savings account and checking account, you have protection against the government printing up lots of fiat-dollars and inflating the purchasing value away from your currency - so why wouldn't anyone not want to do this?

David Morgan: I do believe it's going to catch on - it's hard to say; there's a argument about Gresham's law that good money chases out bad - that you're only going to save the good money. But I don't think this is necessarily true and I don't have time to go into all the arguments, but I interviewed Larry Hilton who wrote the bill - he's a lawyer in Utah - and basically there's lots of reasons why you would want to use physical gold and silver in a transaction. More...

Gold, silver coins to be legal currency in Utah

Image via Wikipedia

Utah legislators want to see the dollar regain its former glory, back to the days when one could literally bank on it being "as good as gold."

To make that point, they've turned it around, and made gold as good as cash. Utah became the first state in the country this month to legalize gold and silver coins as currency. The law also will exempt the sale of the coins from state capital gains taxes.

Craig Franco hopes to cash in on it with his Utah Gold and Silver Depository, and he thinks others will soon follow.

The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings. More...

"Gold Set To Rally" - Goldman Expects Gold To Promptly Rise To $1,480

As we are experiencing a furious regime change, the sellside positional updates are coming fast and furious. The latest major recommendation change comes again from Goldman which has just reiterated its belief gold will reach its 3 month target of $1,480 shortly. Of course, after a Cramer recommendation to buy the metal, this is the only call for a higher gold price that should be of great concern to everyone. From Goldman: "We expect gold prices to rally toward our 3-month price target of $1480/toz, and continue to recommend a long gold trade. More...

Trader Dan's Take on Today's Gold Action

Image via WikipediaTrader Dan
Once again we have a front row seat in the battle between China and the US when it comes to the Federal Reserve’s global inflationary policy, aka, Quantitative Easing 2.

With the Fed persisting on conjuring “wealth” into existence and working to manipulate and deliberately distort the long end of the yield curve, China is fighting to contain the effects of excess liquidity coming its way. It is almost as if Bernanke has uttered the command to: “Release the Kraken”, in this case the terrible Titan being the inflation monster.

The Chinese authorities have good reason to fear the rise of this beast as it, perhaps above all things at the current moment, has the single greatest potential to create unrest and social disorder in their nation. The Fed has been exporting inflation around the globe and nowhere is that showing up more forcefully than in the rising cost of food. Yes, basic material costs are soaring in China but the authorities can live with that – it is food that worries them seeing that the average Chinese worker spends a much larger percentage of their overall income on food than do their counterparts here in the US.

In yet another attempt to try to rein in price rises, the Chinese raised bank reserve ratios to try to slow down growth somewhat and perhaps pull back some of the fuel that might be contributing to the problems that they are dealing with. Of course, once the news hit the wires, out came the hedge fund algorithms, terrified to death that the world economy was now going to collapse, with the result that commodity sector was hit with massive selling all across the board. Down went gold and down went silver and down went the CCI.

Personally, while I understand what the Chinese authorities are attempting to do, I do not think that they are going to be a match for Ben who can manufacture more Dollars faster than Agent Smith could replicate himself in the Matrix. The Chinese are going to need their own version of Neo to combat Ben’s printing press; either that or they are going to have to upwardly revalue the yuan at a faster pace – something that the US schemers have no doubt long intended as part of their QE plan. I am sure Chuckie Schumer will be happy as he has been a one note Johnnie when it comes to blaming China for the US economic woes. “it’s all that currency manipulation by China”. Yeah sure – the US monetary authorities are pristinely pure having never even considered manipulating the US markets.

The move lower in gold takes it back down to the lower portion of the trading range that has contained it for most of this month now with important chart support near $1350 serving to hold it for now. There are plenty of bottom pickers active near this level but the key is whether the funds will sit tight or decide to liquidate some of their longs. Should they do so, price will fall to $1345 which is near the 100 day moving average and has been a level which tends to attract buying from those with a longer term investment view. A breach of that level would be much to the bears’ delight as that would set it up for a drop down towards $1325 – $1320. Asia of course would also be delighted as it would become picnic time for them, with the table being set by hedge fund algorithm selling.

First order of business for the bulls will be get price back above $1365 if they can hold it above $1350. Next they would need to regain $1380 to reaffirm a trading range market.

Along this line I am watching the Euro gold price to see if it can hold its ground above the €1000 level. If so, (the PM Fix today was €1021), that should also shore up the Dollar price of gold. Europe has been the epicenter of a great deal of economic fears so how the price of gold reacts in terms of the Euro will give us a clue as to how the investment world is thinking about the overall health or lack thereof of the wider global economy. Keep in mind what I have written so many times over the past years – the problem with most gold analysts here in the US is that they are too US Dollar gold price focused. All such Elliot Wave claptrap projections based only on the US Dollar price are worthless because gold is an international commodity, or perhaps even more appropriately, international currency.

Silver lost chart support at $28.50 but so far is holding more important support near the $28 level. Silver bulls would not want to see the metal close below that level as it would drop it back down towards $27 where I would suspect we will see very substantial buying emerge. Long term oriented investors would welcome such an occurrence should it indeed take place. The tightness in the physical market suggests that this is once again more of a paper trade thing related to the Comex that we are seeing and not a true reflection of the underlying physical market.

The HUI – what else can be said about the price chart except it stinks but then again, what is new about that during times of gold and silver weakness. It looks like it might want to drift down towards 500 if it violates this week’s low early next week. The 200 day moving average comes in close to that level and should prove to be a solid level of chart support as it has tended to hold dips in price over the last year and a half or so. Also, 500 was tough resistance on the way up back in late spring of 2010. It held on a dip September and October of last year so unless we have some sort of change in the fundamentals for gold and silver that I am currently unawares of, I would expect it to hold. The weekly chart shows an uptrend that is still intact but I would feel more comfortable if it would at least recapture 530. It will need to climb back above 550 to get me excited again. Read More...

Spot Gold Surges

Image via WikipediaGold is rapidly approaching its all time high intraday high (and someone please inform Dennis Gartman that Gold in euro terms is close to its record again), as spot has surged $12 in a few minutes and is now near $1,260 (record intraday was $1,265 set back in June). In addition to the CHF and the JPY, gold is once again the safety trade. This comes hot on the heels of the recent report issued by UniCredit SpA’s Jochen Hitzfeld, the most accurate gold forecaster tracked by Bloomberg in the last three quarters, in which the analyst raised his estimate for the metal’s average price next year by 12 percent to $1,400 an ounce, and for 2012 to $1,600. More...